In this article, we will take a look at the 14 best low risk high growth stocks to buy now.
It’s been months since the markets started to incessantly talk and hear about inflation, rate hikes, recession, layoffs and whatnot. In this backdrop, investors’ appetite for risk has declined and they are on the lookout for stocks that offer low risk and still beat the market. Interestingly, there are many studies which show that low volatile and low risk stocks can actually beat the market.
Investing in “Steady Eddies”
A research report by AllianceBernstein takes a look at an investment strategy that focuses on investing in low volatile stocks. The report calls these stocks “Steady Eddies” and says that an active investing approach which focuses on low volatility and strong fundamentals actually end up beating the market and performs better than passive investing approach that only takes in low volatility into account.
The report says that the outperformance of these low-risk stocks defy the basic rule of finance which says that with more risks come more chances of returns while limiting risks decreases the chances of higher returns. An interesting part of the report says:
“The low-volatility effect is as robust as more prominent anomalies found in low-valuation, small-capitalization and high price momentum stocks. Since 1973, the least volatile quintile of global stocks delivered returns that were one-third higher than the market, 20% less volatility. This performance generated a more than 50% higher Sharpe ratio—or absolute return relative to risk.”
The report also calculates the average returns of two hypothetical stocks: a stock with high volatility and a stock with low volatility. The low volatile investment outperforms the high volatility stock. Why? The report says it’s because of the compounding effects of the “ups and downs on actual investment earnings.” Volatile stocks simply lose a lot during market downturns and they have to work a lot to first recoup their losses and then begin their journey towards gains before hitting another market crash.
This research is highly relevant to the market situation investors are grappling with today. A beginner investor with a limited budget could do much better by putting money into low risk stocks than trying their luck with highly volatile stocks with apparently high growth potential. In this backdrop we decided to discuss some stocks in this article which apparently have low risk but higher growth.
Our Methodology
For this article we first used a stock screener to identify stocks with high EPS and sales growth over the past five years and beta value less than 1. A beta value of less than 1 shows low volatility. From these checks we got a long list of stocks, from which we narrowed down to 14 stocks with the highest number of hedge fund investors. This way, the stocks mentioned in this article are some of the best low risk high growth stocks to buy now according to smart money investors.
Best Low Risk High Growth Stocks to Buy Now
14. Zscaler, Inc. (NASDAQ:ZS)
Number of Hedge Fund Holders: 38
Cloud security and software company Zscaler, Inc. (NASDAQ:ZS) has seen its shares grow by about 30% year to date through August 11. As of the end of the first quarter of 2023, 38 hedge funds in Insider Monkey’s database reported owning stakes in Zscaler, Inc. (NASDAQ:ZS). The biggest hedge fund stakeholder of Zscaler, Inc. (NASDAQ:ZS) was John Overdeck and David Siegel’s Two Sigma Advisors which had a $123 million stake in the company.
BTIG recently upgraded Zscaler, Inc. (NASDAQ:ZS) to Buy from Neutral. Zscaler, Inc. (NASDAQ:ZS)’s analyst Gray Powell set a price target of $185.
Artisan Global Discovery Fund made the following comment about Zscaler, Inc. (NASDAQ:ZS) in its Q4 2022 investor letter:
“Zscaler, Inc. (NASDAQ:ZS) provides cloud-based Internet security solutions. In the quarter, it announced 54% revenue growth and expected growth of nearly 40% in 2023 (ahead of expectations). Despite solid fundamental momentum, shares have underperformed this year as investors have grown concerned about slowing demand for enterprise software as the broader global economy slows. We believe the dual trends of rising security vulnerability and increased enterprise digitization will lead to sustained demand, even in a recession. Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. Meanwhile, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a more remote workforce (versus pre-pandemic) make operating IT infrastructures increasingly complex. Give the attractive long-term outlook and depressed valuations, we added to the position.”
13. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 39
Chinese real estate services company KE Holdings Inc. (NYSE:BEKE) – ADR shares have gained about 9% year to date.
In May KE Holdings Inc. (NYSE:BEKE) posted Q1 results. Adjusted EPADS in the quarter came in at $0.43, beating estimates by $0.18. Revenue in the quarter jumped 61.6% year over year to $295 billion, surpassing estimates by $410 million.
Out of the 943 hedge funds in Insider Monkey’s database, 39 hedge funds were long KE Holdings Inc. (NYSE:BEKE). The most significant stakeholder of KE Holdings Inc. (NYSE:BEKE) during this period wa s
Artisan Developing World Fund made the following comment about KE Holdings Inc. (NYSE:BEKE) in its second quarter 2023 investor letter:
“Bottom contributors to performance for the quarter included real estate platform KE Holdings Inc. (NYSE:BEKE). Beike fell due to weaker industry property sales in China in April following the release of strong pent-up demand in Q1, despite accelerating revenue and very modest cost growth.”
12. Equinix, Inc. (NASDAQ:EQIX)
Number of Hedge Fund Holders: 39
Internet and data center services Equinix, Inc. (NASDAQ:EQIX) ranks 12th in our list of the best low risk high growth stocks to buy now. Equinix, Inc. (NASDAQ:EQIX) has already gained about 16% year to date through August 11. Equinix, Inc. (NASDAQ:EQIX) recently announced a $42 million investment in India.
As of the end of the first quarter of 2023, 39 hedge funds in Insider Monkey’s database were long Equinix, Inc. (NASDAQ:EQIX). The most significant hedge fund stakeholder of Equinix, Inc. (NASDAQ:EQIX) was Ian Simm’s Impax Asset Management which owns a $461 million stake in the company.
Baron Real Estate Fund made the following comment about Equinix, Inc. (NASDAQ:EQIX) in its second quarter 2023 investor letter:
“We recently increased the Fund’s exposure to data center REITs by acquiring additional shares in Equinix, Inc. (NASDAQ:EQIX) and re-initiating a position in Digital Realty Trust, Inc.
Data center landlords such as Equinix and Digital Realty are benefiting from record low vacancy, demand outpacing supply, more constrained power availability, and rising rental rates. Several secular demand vectors, which are currently broadening, are contributing to robust fundamentals for data center space globally. They include the outsourcing of information technology infrastructure, increased cloud computing adoption, the ongoing growth in mobile data and internet traffic, and artificial intelligence as a new wave of data center demand. Put simply, each year data continues to grow exponentially, and all of this data needs to be processed, transmitted, and stored – supporting increased demand for data center space. In addition, while it is still early innings, we believe artificial intelligence could not only provide a source of incremental demand but also further accelerate existing secular trends by driving increased prioritization and additional investment in digital transformation among enterprises.
We recently spent time with the management teams at both Equinix and Digital Realty and are optimistic about their prospects. We believe Equinix, the premier global operator of network-dense, carrier-neutral colocation data centers, is well positioned to grow its cash flow per share by more than 10% annually for the next few years.”
11. Atlassian Corporation (NASDAQ:TEAM)
Number of Hedge Fund Holders: 39
Atlassian Corp ranks 10tht in our list of the best low risk high growth stocks to buy now. Earlier in August, Atlassian Corporation (NASDAQ:TEAM) posted strong fiscal Q4 results, beating the Street’s estimates on both EPS and revenue. Atlassian Corporation (NASDAQ:TEAM)’s revenue in the quarter jumped about 24% on a YoY basis. After the results several analysts upgraded Atlassian Corporation (NASDAQ:TEAM) and gave positive comments about the company. William Blair analyst Arjun Bhatia, who has an Outperform rating on Atlassian Corporation (NASDAQ:TEAM), said that the company results were helped by “strong demand” in the enterprise and “robust” migration to the cloud and data center.
A total of 39 hedge funds tracked by Insider Monkey reported owning stakes in Atlassian Corporation (NASDAQ:TEAM).
Artisan Partners made the following comment about Atlassian Corporation (NASDAQ:TEAM) in its Q4 2022 investor letter:
“Among our bottom contributors were Atlassian Corporation (NASDAQ:TEAM), SVB Financial Group and Catalent. The tougher macro environment caught up with Atlassian in the quarter as the company is seeing slower software user additions as customers of all sizes moderate hiring and spending. However, the company still expects to grow sales at a mid-20s rate in Q4 and grow its strategically important cloud revenues 40%–45%. These are slower rates than we expected, and could slow further, but Atlassian’s growth metrics remain solid in light of the environment. In the short term, slower revenue growth will likely pressure margins and profitability given the company’s rapid hiring expansion in recent periods. But we detect a meaningful shift in tone from management on expense growth and margins now that top-line growth is slowing. While we fully expect Atlassian to keep investing in its large growth opportunities, we think a prudent reprioritization of this spending will lead to margin tailwinds in the medium term. We are sensitive to the slowing near-term growth dynamics but believe remaining invested is appropriate given the longer term profit growth potential.”
10. Five9, Inc. (NASDAQ:FIVN)
Number of Hedge Fund Holders: 41
Cloud software company Five9, Inc. (NASDAQ:FIVN) ranks 10th in our list of the best low risk high growth stocks to buy now. A total of 41 hedge funds out of the 943 funds reported owning stakes in Five9, Inc. (NASDAQ:FIVN). The most significant stakeholder of Five9, Inc. (NASDAQ:FIVN) was Daniel Patrick Gibson’s Sylebra Capital Management which owns a $186 million stake in the company.
Wasatch U.S. Select Strategy made the following comment about Five9, Inc. (NASDAQ:FIVN) in its Q4 2022 investor letter:
“Five9, Inc. (NASDAQ:FIVN) was another detractor. The stock was down after the company announced that the CEO had resigned to lead a new company. While we appreciated the outgoing CEO’s leadership, we believe there’s still a lot to like about the company. Five9 offers cloud-based software for contact centers, including customer-relationship-management integrations that include real-time (and historical) reporting, recording and quality monitoring. We believe there’s a long runway of growth for the company, as the contact center becomes the key point of customer engagement in a “remote” world, and as companies seek to move their contact-center records and operations to the cloud. We believe the CEO taking the reins, who is Five9’s chairman and former CEO, can help the company continue to carry out its strategic growth initiatives.”
9. Neurocrine Biosciences, Inc. (NASDAQ:NBIX)
Number of Hedge Fund Holders: 43
California-based biopharmaceutical company Neurocrine Biosciences, Inc. (NASDAQ:NBIX) ranks 9th in our list of the best low risk high growth stocks to buy now. As of the end of the first quarter of 2023, 43 hedge funds out of the 943 funds reported owning stakes in Neurocrine Biosciences, Inc. (NASDAQ:NBIX).
Neurocrine Biosciences, Inc. (NASDAQ:NBIX) recently posted Q2 results. Adjusted EPS in the quarter came in at $1.25 beating estimates by $0.13. Revenue in the quarter jumped about 20% year over year.
HL Global Small Companies Equity Strategy made the following comment about Neurocrine Biosciences, Inc. (NASDAQ:NBIX) in its first quarter 2023 investor letter:
“We underperformed in Health Care, in which Neurocrine Biosciences, Inc. (NASDAQ:NBIX) was our biggest relative detractor. The drugmaker’s quarterly results failed to impress the market even as the outlook for its Ingrezza product-the only treatment for tardive dyskinesia, a nervous-system disorder resulting from psychiatric medicines-remains solid.”
8. Interactive Brokers Group, Inc. (NASDAQ:IBKR)
Number of Hedge Fund Holders: 44
Financial services company Interactive Brokers Group, Inc. (NASDAQ:IBKR) ranks 8th in our list of the best low risk high growth stocks to buy now. Interactive Brokers Group, Inc. (NASDAQ:IBKR) recently jumped after the company reported strong daily average revenue trades (DARTs) for July.
As of the end of the first quarter of 2023, 44 hedge funds out of the 943 funds reported owning stakes in Interactive Brokers Group, Inc. (NASDAQ:IBKR). The biggest stakeholder of the company during this period was William B. Gray’s Orbis Investment Management which owns a $591 million stake in Brokers Group, Inc. (NASDAQ:IBKR).
LVS Advisory made the following comment about Interactive Brokers Group, Inc. (NASDAQ:IBKR) in its second quarter 2023 investor letter:
“We also modestly added to our position in Interactive Brokers Group, Inc. (NASDAQ:IBKR) in the mid-$70s. We initiated our Interactive Brokers position last summer and published a write-up in September 2022. Interactive Brokers continues to trade at a discounted multiple as investors are skeptical that the company will continue to sustain the current level of net interest income beyond the near future. However, recent reports showing strength in the US economy and labor market suggest that interest rates won’t be cut in the near term. The company publishes monthly KPI metrics and investors appear to be ignoring recent strength in trading volume and margin loans. The current market environment of rising stock prices and elevated interest rates is a goldilocks environment for the company. With this last buy, we have now reached our limit of investing 10% of our portfolio at cost in the stock and can no longer increase the holding size.”
7. Lantheus Holdings, Inc. (NASDAQ:LNTH)
Number of Hedge Fund Holders: 46
Lantheus Holdings, Inc. (NASDAQ:LNTH) shares have gained about 46% year to date through August 11. As of the end of the first quarter of 2023, 46 hedge funds in Insider Monkey’s database of 943 hedge funds were long Lantheus Holdings, Inc. (NASDAQ:LNTH). The biggest stakeholder of Lantheus Holdings, Inc. (NASDAQ:LNTH) was Paul Marshall and Ian Wace’s Marshall Wace LLP which owns a $90 million stake in the company.
Lantheus Holdings, Inc. (NASDAQ:LNTH) recently posted Q2 results. Adjusted EPS in the quarter came in at $1.54 beating estimates by $0.23. Revenue in the quarter jumped about 44% on a year over year basis.
6. LPL Financial Holdings Inc. (NASDAQ:LPLA)
Number of Hedge Fund Holders: 52
LPL Financial Holdings Inc. (NASDAQ:LPLA) shares have gained about 4.5% year to date.
In July, LPL Financial Holdings Inc. (NASDAQ:LPLA) posted Q2 results. Adjusted EPS in the period came in at $3.94 beating estimates by $0.06. Revenue in the quarter jumped about 21.1% year over year to $2.47 billion, beating estimates by $30 million.
As of the end of the first quarter of 2023, 52 hedge funds out of the 943 hedge funds in Insider Monkey’s database held stakes in LPL Financial Holdings Inc. (NASDAQ:LPLA). The biggest stakeholder of LPL Financial Holdings Inc. (NASDAQ:LPLA) was Tom Gayner’s Markel Gayner Asset Management which owns a $28 million stake in the company.
Baron FinTech Fund made the following comment about LPL Financial Holdings Inc. (NASDAQ:LPLA) in its Q1 2023 investor letter:
“LPL Financial Holdings Inc. (NASDAQ:LPLA) is the largest independent broker-dealer in the U.S. Following a strong run in 2022, the stock detracted in the quarter. The weakness was largely driven by turmoil in the banking industry after the failure of SVB, which caused investors to sour on financial stocks in general. We believe LPL is immune from most of the issues facing banks. LPL is not a bank itself, has a relatively small balance sheet, and has a low-risk, short-duration securities portfolio. The banking crisis has caused investors to take a more dovish view on the path of interest rates, which is a headwind to LPL’s earnings as the economics on a large portion of client cash is tied to floating rates. However, we believe the company has an attractive growth profile even in a lower interest rate environment.”
5. Take-Two Interactive Software, Inc. (NASDAQ:TTWO)
Number of Hedge Fund Holders: 52
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is in the news as the company recently posted fiscal Q1 results. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) saw a boost in recurring bookings in the period and also updated its full-year guidance. Total net bookings in the quarter jumped 20% to $1.2 billion. Net bookings from recurrent spending jumped 38%.
As of the end of the first quarter of 2023, 52 hedge funds out of the 943 funds reported owning stakes in Take-Two Interactive Software, Inc. (NASDAQ:TTWO). The biggest stakeholder of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) was Chase Coleman and Feroz Dewan’s Tiger Global Management LLC which owns a $286 million stake in the company.
Diamond Hill All Cap Select Strategy made the following comment about Take-Two Interactive Software, Inc. (NASDAQ:TTWO) in its Q4 2022 investor letter:
“Video game developer Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has faced weakness in the mobile gaming market, in addition to game-launching delays. The company reported underwhelming quarterly results in Q4 and lowered its full-year guidance. After reexamining our long-term thesis, we decided to exit our position in favor of more attractive opportunities.”
4. PDD Holdings Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 62
PDD Holdings Inc. (NASDAQ:PDD) is a notable Chinese e-commerce company. In May PDD Holdings Inc. (NASDAQ:PDD) reported solid Q1 results. Adjusted EPADS in the quarter came in at $1.01, beating estimates by $0.38. Revenue in the period jumped about 58% year over year to $5.48 billion, surpassing estimates by $920 million.
Hedge funds tracked by Insider Monkey are also bullish on PDD Holdings Inc. (NASDAQ:PDD). As of the end of the first quarter of 2023, 62 hedge funds out of the 943 funds in our database held stakes in PDD Holdings Inc. (NASDAQ:PDD). The biggest stakeholder of PDD Holdings Inc. (NASDAQ:PDD) was Lei Zhang’s Hillhouse Capital Management which owns an $808 million stake in the company.
3. The Progressive Corporation (NYSE:PGR)
Number of Hedge Fund Holders: 64
Insurance company The Progressive Corporation (NYSE:PGR) ranks 3rd in our list of the best low risk high growth stocks to buy now. As of the end of the first quarter of 2023, 64 hedge funds tracked by Insider Monkey were long The Progressive Corporation (NYSE:PGR).
In July, The Progressive Corporation (NYSE:PGR) shares jumped after J.P. Morgan analyst Jimmy Bhullar upgraded the stock to Overweight from Neutral. The ratings upgrade came despite The Progressive Corporation (NYSE:PGR)’s weak numbers recently posted. The analyst said:
“Despite poor margins in the past two years, our long-term outlook for the personal auto market is upbeat, and we consider it a structurally better business than commercial lines or reinsurance.”
The London Company Large Cap Strategy made the following comment about The Progressive Corporation (NYSE:PGR) in its second quarter 2023 investor letter:
“The Progressive Corporation (NYSE:PGR) – PGR underperformed during Q2 due to concerns about additional price hikes needed to maintain its targeted profitability ratio. PGR continues to increase auto policies in force, but recent costs were higher than expected. To combat weaker than expected margins, PGR is reducing advertising spending and increasing prices on insurance. Looking ahead, we believe PGR remains well positioned reflecting its more flexible pricing platform and tech solutions that monitor and price for distracted driving. While near-term costs were higher than expected, PGR has a great track record of profitability and conservative underwriting philosophy.”
2. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 72
Cybersecurity company CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is one of the notable high growth low risk stocks to buy now according to hedge funds. A total of 72 hedge funds in Insider Monkey’s database of 943 hedge funds reported owning stakes in the company. The most significant stakeholder of CrowdStrike Holdings, Inc. (NASDAQ:CRWD) during this period was Ken Griffin’s Citadel Investment Group which owns a $232 million stake in the company.
Artisan Developing World Fund made the following comment about CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q1 2023 investor letter:
“Top contributors to performance for the quarter included graphics semiconductor company Nvidia, Southeast Asian e-commerce platform Sea, Latin American marketplace MercadoLibre, online travel marketplace Airbnb, and endpoint security company CrowdStrike Holdings, Inc. (NASDAQ:CRWD). CrowdStrike rebounded as its financial results eased demand-related concerns in its core endpoint business, while adoption in platform adjacencies continued to rise.”
1. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 87
The Charles Schwab Corporation (NYSE:SCHW) shares have gained about 11% over the past 30 days. As of the end of the first quarter of 2023, 87 hedge funds out of the 943 funds in Insider Monkey’s database had stakes in The Charles Schwab Corporation (NYSE:SCHW). The biggest stakeholder of The Charles Schwab Corporation (NYSE:SCHW) during this period was David Blood and Al Gore’s Generation Investment Management which owns a $527 million shares in the company.
The Charles Schwab Corporation (NYSE:SCHW) recently posted strong Q2 results. Adjusted EPS in the period came in at $0.75, beating estimates by $0.04.
Weitz Partners III Opportunity Fund made the following comment about The Charles Schwab Corporation (NYSE:SCHW) in its second quarter 2023 investor letter:
“Lastly, we elected to sell our shares of The Charles Schwab Corporation (NYSE:SCHW) as the regional bank crisis unfolded during the first quarter. That sale crystalized underperformance that will likely linger on our top detractor list as we move through the year, despite no longer impacting our forward-looking performance.”
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Disclosure: None. 14 Best Low Risk High Growth Stocks to Buy Now is originally published on Insider Monkey.
